Kuwait Petrochemicals Report Q3 2011
Includes 3 FREE quarterly updates
There are no plans for major additions to Kuwait’s olefins capacity until 2016 with the Olefins III project at 1.4mn tonnes per annum (tpa) of ethylene production capacity, but BMI’s latest Kuwait Petrochemicals Report raises concerns over whether the country has the upstream resources to expand further. Additionally, Kuwait’s reliance on naphtha as its primary feedstock means the industry will struggle to compete, with BMI putting the 2010 average naphtha price at US$77.65/bbl, up almost 31% from the previous year’s level.
Despite the absence of near-term international oil company (IOC) investment, crude production is forecast to increase from an estimated 2.49mn barrels per day (b/d) in 2010 to 2.79mn b/d in 2015, subject to OPEC quotas. Gas production should reach 17.8bn cubic metres (bcm) by 2015, up from an estimated 13.2bcm in 2010, and rising to 20.8bcm by 2020. With 2010-2020 demand growth of 70.6%, this provides an import requirement rising to 3.3bcm by 2020. The exploitation of gas reserves will be crucial to ensuring access to cheaper ethane feedstock that holds the key to improving margins and competitiveness of Kuwaiti petrochemicals production.
However, there are some promising recent developments that signal an expansion in downstream industries. In October 2010, Kuwait Aromatics Company (Karo) – 40% owned by Petrochemicals Industries Company, 40% Kuwait National Petroleum Company and 20% Qurain Petrochemical Industries – indicated it was studying plans to develop a downstream project from the company’s recently completed paraxylene plant at Shuaiba. Karo completed construction of the Kuwait Paraxylene Production Company aromatics complex in December 2009 and will start selling heavy aromatics during 2011. The complex, which cost about US$2bn to build, is designed to produce 822,000tpa paraxylene and 370,000tpa benzene. The plans were at the feasibility study stage in Q410 and the company aims to finalise the study during 2011. BMI believes it likely that Karo is looking to establish a purified terephthalic acid-polyethylene terephthalate chain, which would revive previously proposed plans. Karo has already received licences from the Public Authority for Industry to establish the plants.
By 2010, Kuwait had an ethylene capacity of 1.7mn tpa feeding downstream units that included 825,000tpa linear low-density polyethylene (LLDPE). It also has 370,000tpa of benzene, 822,000tpa of xylenes, 1mn tpa of ethylene glycol (EG), 765,000tpa of ethylene oxide (EO) and 160,000tpa of polypropylene (PP) capacity. In the fertiliser sector, Kuwait has capacities of 1.04mn tpa urea and 885,000tpa ammonia. Levels of olefins and polyolefins capacities are unlikely to be increased before 2015, with the main expansion projects completed in 2009.
BMI has revised down Kuwait’s Petrochemicals Business Environment Rating by 1.2 points to 57.0 points this quarter due to a decline in its Country Risk scores. It retains its fourth position, 5.7 points behind the UAE but just 0.6 points ahead of Iran. Kuwait’s score declined over 2010 due to uncertainty over the future of the al-Zour refinery, which has attracted considerable controversy over its tendering process. Kuwait’s score has also come under pressure in recent months due to deterioration in country risk caused by the economic downturn, coupled with the declining investment environment following the cancellation of Kuwait Petroleum Corporation’s planned joint venture (JV) with Dow, although overall its Country Risk ratings are still better than in mid-2009, owing to an improvement in the country’s economic outlook.
There are no plans for major additions to Kuwait’s olefins capacity until 2016 with the Olefins III project at 1.4mn tonnes per annum (tpa) of ethylene production capacity, but BMI’s latest Kuwait Petrochemicals Report raises concerns over whether the country has the upstream resources to expand further. Additionally, Kuwait’s reliance on naphtha as its primary feedstock means the industry will struggle to compete, with BMI putting the 2010 average naphtha price at US$77.65/bbl, up almost 31% from the previous year’s level.
Despite the absence of near-term international oil company (IOC) investment, crude production is forecast to increase from an estimated 2.49mn barrels per day (b/d) in 2010 to 2.79mn b/d in 2015, subject to OPEC quotas. Gas production should reach 17.8bn cubic metres (bcm) by 2015, up from an estimated 13.2bcm in 2010, and rising to 20.8bcm by 2020. With 2010-2020 demand growth of 70.6%, this provides an import requirement rising to 3.3bcm by 2020. The exploitation of gas reserves will be crucial to ensuring access to cheaper ethane feedstock that holds the key to improving margins and competitiveness of Kuwaiti petrochemicals production.
However, there are some promising recent developments that signal an expansion in downstream industries. In October 2010, Kuwait Aromatics Company (Karo) – 40% owned by Petrochemicals Industries Company, 40% Kuwait National Petroleum Company and 20% Qurain Petrochemical Industries – indicated it was studying plans to develop a downstream project from the company’s recently completed paraxylene plant at Shuaiba. Karo completed construction of the Kuwait Paraxylene Production Company aromatics complex in December 2009 and will start selling heavy aromatics during 2011. The complex, which cost about US$2bn to build, is designed to produce 822,000tpa paraxylene and 370,000tpa benzene. The plans were at the feasibility study stage in Q410 and the company aims to finalise the study during 2011. BMI believes it likely that Karo is looking to establish a purified terephthalic acid-polyethylene terephthalate chain, which would revive previously proposed plans. Karo has already received licences from the Public Authority for Industry to establish the plants.
By 2010, Kuwait had an ethylene capacity of 1.7mn tpa feeding downstream units that included 825,000tpa linear low-density polyethylene (LLDPE). It also has 370,000tpa of benzene, 822,000tpa of xylenes, 1mn tpa of ethylene glycol (EG), 765,000tpa of ethylene oxide (EO) and 160,000tpa of polypropylene (PP) capacity. In the fertiliser sector, Kuwait has capacities of 1.04mn tpa urea and 885,000tpa ammonia. Levels of olefins and polyolefins capacities are unlikely to be increased before 2015, with the main expansion projects completed in 2009.
BMI has revised down Kuwait’s Petrochemicals Business Environment Rating by 1.2 points to 57.0 points this quarter due to a decline in its Country Risk scores. It retains its fourth position, 5.7 points behind the UAE but just 0.6 points ahead of Iran. Kuwait’s score declined over 2010 due to uncertainty over the future of the al-Zour refinery, which has attracted considerable controversy over its tendering process. Kuwait’s score has also come under pressure in recent months due to deterioration in country risk caused by the economic downturn, coupled with the declining investment environment following the cancellation of Kuwait Petroleum Corporation’s planned joint venture (JV) with Dow, although overall its Country Risk ratings are still better than in mid-2009, owing to an improvement in the country’s economic outlook.
Contents
Executive SummarySWOT Analysis
Kuwait Petrochemicals Industry SWOT
Kuwait Political SWOT
Kuwait Economic SWOT
Kuwait Business Environment SWOT
Global Overview
Petrochemicals Market Overview
Financial Results
Global Oil Products Price Outlook
Table: Oil Product Price Assumptions, Q410-Q411 (US$/bbl)
Table: Oil Product Price Data And Forecasts, 2008-2015 (US$/bbl)
Gulf Regional Overview
Table: Announced Ethylene Crackers In The Gulf Region
Kuwait Market Overview
Industry Trends And Developments
Upstream
Corporate Developments
Olefins And Polyolefins
Aromatics
Overseas Investments
Business Environment Ratings
Table: Middle East And Africa Petrochemicals Business Environment Ratings
Overview Of Kuwait’s Business Environment
Industry Forecast Scenario
Table: Kuwaiti Petrochemicals Sector, 2007-2015 (’000tpa, Unless Otherwise Stated)
Macroeconomic Outlook
Kuwait – Economic Activity
Company Profiles
Equate Petrochemical Company
Petrochemicals Industries Company (PIC)
Glossary Of Terms
Table: Glossary Of Petrochemicals Terms
BMI Methodology
How We Generate Our Industry Forecasts
Chemicals And Petrochemicals Industry
Cross Checks
Business Environment Ratings
Table: Petrochemicals Business Environment Indicators And Rationale
Weighting
Table: Weighting Of Indicators 50 Skip to top